We think USD rates have hit a pain threshold, where sentiment is being dented. The bounce in USD rates over the past few weeks is substantial. Implied 10Y real yields have risen by 41bps since the low registered in mid-September, just before the Fed cut by 50bps. In level terms, 10Y real yields are now hovering just below 2%. Rate worries, as represented by implied volatility in Treasuries, have also pushed to a new high for the year. There are two things to watch. First, the pace of UST selloff (or rise in implied real yields) is the main consideration. An increase of real rates of roughly 50bps over a month would be a warning signal. Second, this signal could be amplified if real rates cross 2%.In which case, there would be substantial tightening in financial conditions at a time when real rates are already restrictive. These conditions are about to materialise as worries about the US elections persist over the coming two weeks. The overnight selloff in US stocks may be an early warning signal that this is happening. If risk aversion takes hold proper, we suspect that haven bids for Treasuries (which have been elusive thus far) would likely kick in. 
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